Transfering ownership of a site & Inland Revenue

[Smokin Joe]

Junkie, what date was the land transferred, was it before or after 6th April 2008?

If after then they will be charged 18% on their gain.  Assuming they paid very little for the land they could be looking at a CGT bill of £27k.

It is more complicated if it was transferred pre 6/4/08.  In this case the gain is reduced by taper relief depending on the length of time your parent's owned the land and whether it was a "business asset" or not.  This gain is then added to their income, so it will probably (perhaps) bring them into the 40% tax band, in which case at least some of the gain would be taxed at 40%, with the balance at 20%.

The above is why it is preferable to get land transferred before the planning permission is granted as you could argue that the market value of the land without planning prmission wasn't much.

[GAA_Junkie]

Oh shit!

The land was transferred in Feb/March 08 with planning permission already in place.  They have owned the land for 15/20 years but had set (rented it) to a local farmer.

[Smokin Joe]

As the land was rented out I guess that your parents could claim it as a "business asset".

If that is the case then the good news is that they will get 75% relief, so assuming a cost to them was £0, they would have a gain of £150k, but £112,500 would see relief, so they would only be taxed on £37,500.  This amount would be added to their income and taxed as if it were salary.

If on the other hand it wasn't a business asset then they would just get 40% relief.

There should be enough there to give you an idea of the position.

Best to see an accountant to get the proper figures, though if you did talk to one then they might feel obliged to make you report the transaction, whereas I don't have a clue who you are 

[GAA_Junkie]

Cheers Joe.  Its a fecking nightmare and one I could have done without.

[under the bar]

They'll need evidence that it was rented tho and as most conacre used to be cash in an envelope you might not have this.   

[Smokin Joe]

I was presuming that the parent's would have declared the rent in previous years on their tax return.  If not, i agree it would be difficult to swing now.

[magickingdom]

didnt mean to be flippant above gaa junkie but it is really important to get the advice of an accountant before a transaction like this is done. i'm presuming your going to build your house on this site (and not building to sell on) in which case you should get a lower valuation for the site. in the republic the revenue accept valuations from auctioneers in transactions that are not at arms length so get one that will give you a suitable valuation (i've seen the same site valued at 250k and 110k by different auctioneers)..

[pintsofguinness]

I was presuming that the parent's would have declared the rent in previous years on their tax return.  If not, i agree it would be difficult to swing now.

Declaring it on your tax return? What sort of world do you live in?


Am I missing something here - but wouldnt gaajunkies parent's only be liable for cgt if he'd paid them for the site?

[magickingdom]

I was presuming that the parent's would have declared the rent in previous years on their tax return.  If not, i agree it would be difficult to swing now.

Declaring it on your tax return? What sort of world do you live in?


Am I missing something here - but wouldnt gaajunkies parent's only be liable for cgt if he'd paid them for the site?

for tax purposes if a transaction between parties is not at arms length (ie to a 3rd party) then the transaction value is deemed to be at market value. it has to be this way

[passedit]

No tax now, none if your parents are still alive in 2015.


That'll be £250 please.

[pintsofguinness]

No tax now, none if your parents are still alive in 2015.

Why do you say he's got no stamp duty now?

[passedit]

sorry stamp duty yes (already paid and good value as far as i can see) dealt with by a competent solicitor. No other tax to pay.

[Smokin Joe]

I don't think there is any stamp duty payable.  I think that stamp duty is payable on the purchase price so it would be zero.

Technically there is CGT to be paid, though I'm not sure if the Revenue would ever find out about it.

[GAA_Junkie]

Lads I got the reply below from an accountant friend. 
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There are no exemptions between family - the only way around it is gift relief.

Say your parents give you a site (free) they would be deemed to have received mrket value and would be liable to pay Capital Gains tax on that site

They can however elect to roll over the gain to yourself and when you would go to sell the site you would have a double tax charge in effect - but only when you sell it!

If the site & house however becomes your PPR (Main private residence) then it is exempt from any Capital Gains Tax if you go on to live in it.

So really if you build on the site and live in it and its your PPR you will have no tax to pay and neither will you father but if you build a house and sell it without living in it you will have to pay your gain and the gain rolled over from your father

[Smokin Joe]

Gaa Junkie, unfortunately I don't think there is a way out of it.  I asked a tax consultant, and his answer is:

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Rollover relief only applies where the proceeds of the disposal are reinvested into another 'business asset'. Residential property doesn't qualify as a business asset, nor, broadly, does land attached to a private residence.

Holdover relief, (which I think is what you were referring to), is also only available for business assets and again probably wouldn't apply in this case.

Unless it's a commercial patch of land..........?
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